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If you have exposure to be charged with tax evasion in Oakland, are at the center of an IRS criminal investigation, or are concerned about potential tax fraud charges arising from a scheduled or in-progress tax audit, the time to contact an attorney is now – before you accidentally provide the government with self-incriminating information. An experienced criminal tax defense lawyer provides you with the attorney-client privilege, which is absent from any statements, records, or interactions involving your accountant or tax preparer. Only a criminal tax defense attorney possesses the skill set, the qualifications, and the legal understanding to protect your constitutional rights effectively, while strategically pursuing reductions to the serious civil penalties and minimization or elimination of the criminal tax exposure you are facing.
Under Section 7201 of the Internal Revenue Code, tax evasion is defined as any attempt to evade or defeat any tax or payment. This means that the taxpayer and any person assisting in the evasion can be prosecuted. The statute allows the IRS to prosecute individuals who aid in evading another’s tax liability. In Oakland, individuals and businesses facing tax evasion charges must navigate complex legal terrain for a successful defense. To secure a conviction for tax evasion, the government must prove five key elements beyond a reasonable doubt: (1) the defendant aided, assisted, procured, counseled, or advised another in the preparation of a tax return (or another document related to tax laws); (2) the tax return (or other document) falsely stated something; (3) the defendant knew the statement was false; (4) the false statement was about a “material” matter; and (5) the defendant acted willfully, intending to violate a known legal duty.
It is essential to emphasize the distinction between tax avoidance and tax evasion. Tax avoidance involves legally structuring one’s affairs to reduce tax liability, while tax evasion involves willfully attempting to avoid paying taxes that are owed. Tax evasion is illegal and carries severe civil and criminal tax penalties.
What is Tax Evasion (Tax Fraud)?
Though your attorney will handle the legal work and defenses to tax evasion on your behalf, understanding the allegations against you can help to alleviate your fears and make the process less jarring. Below, we offer an overview of what tax evasion is, how tax evasion charges are graded, and the potential penalties that can result from a conviction.
Types of Tax Evasion
Tax evasion, or tax fraud, is legally defined in the Internal Revenue Code (IRC) under IRC 26 U.S. § 7201, or 26 U.S. Code § 7201. This statute provides a succinct yet broad definition, stating, “Any person who willfully attempts in any manner to evade or defeat any tax imposed by this title or the payment thereof shall” be guilty of committing the crime of tax evasion.
Even though this definition is only a single sentence, it introduces two discrete concepts, namely attempts to “defeat any tax… or the payment thereof,” under the relevant code sections. Likewise, the IRS Tax Crimes Handbook differentiates between evasion of assessment and evasion of payment. (For instance, the IRS might assess, or determine that the taxpayer is liable for, additional tax following an audit.) The term “evasion of assessment” indicates a willful attempt to block the government from accurately determining what the taxpayer owes – for instance, by concealing or underreporting income. By comparison, “evasion of payment” indicates the willful nonpayment of the taxes assessed. Though technically separate, these offenses are often lumped together and referred to simply as “Section 7201 evasion,” as we discussed in our explanation of how evasion of assessment differs from evasion of payment.
What is Civil Tax Fraud?
Civil tax fraud involves the government showing that you intend to escape your tax obligations fraudulently. Unlike many criminal tax offenses, ignorance of the law can be a defense in tax law. Willful intent is legally distinguished from negligence, inadvertence, and reliance on incorrect technical tax advice. The government must present clear and convincing evidence that civil tax fraud occurred.
What is Criminal Tax Evasion?
Criminal tax evasion is any willful attempt to evade tax obligations that could result in a civil fraud penalty. Tax evasion includes making false statements to the IRS, concealing assets, or failing to file tax returns. For a conviction, the prosecution must prove guilt beyond a reasonable doubt—a rigorous standard. Penalties for tax evasion include imprisonment and restitution for financial harm caused to federal and state governments.
Can I Face Both Civil and Criminal Tax Penalties?
Taxpayers can be held accountable for both civil tax fraud and criminal tax evasion for the same conduct. The government decides which tax offenses defendants will be charged with and how that behavior will be punished. While civil tax fraud usually results in monetary fines, those convicted of tax evasion can face imprisonment and restitution.
Is Tax Evasion a Felony or Misdemeanor?
The short answer to this question is that willful tax evasion is graded as a felony offense. Most tax crimes are treated as federal felonies, with a few exceptions that are sometimes charged as misdemeanors, such as violations of 26 U.S. Code § 7207 (i.e. filing fraudulent tax returns).
Tax Evasion Penalties: Sentencing, Fines, and IRS Restitution
As provided by 26 U.S. Code § 7201, the federal tax evasion statute, a willful attempt to defeat or evade tax – whether its payment, assessment, or both – is a felony offense. The maximum penalty for tax evasion, in accordance with 26 U.S. Code § 7201, is a prison sentence of up to five years. This sentence may be imposed in place of, or in addition to, a criminal fine of up to $100,000 (or, for corporations, $500,000).
Judges may deviate from these guidelines and impose lesser penalties, provided there is legal justification for doing so. On the other hand, judges may also impose some additional penalties that are not explicitly mentioned in the statutes. For example, it is common for tax offenders to be sentenced to one or more years of supervised release, which is similar to being on probation, after they are released from prison. Additionally, defendants who are convicted of tax fraud are usually required to pay restitution to the IRS, which can substantially compound the criminal fines established by 26 U.S. Code § 7201.
According to the United States Sentencing Commission, 584 cases of tax fraud were reported during the 2017 fiscal year. The majority of these cases – at least 85 in total – were prosecuted here in California. The average prison sentence for tax evasion that year was 17 months. Just under 60% of the offenders “were sentenced to imprisonment only,” while the remainder received other penalties.
How Can I Avoid Civil Tax Fraud and Criminal Tax Evasion?
With the right tax professional’s help, you can employ tax filing practices to avoid criminal tax evasion charges and civil tax fraud penalties. Always present accurate, complete information to your preparer and avoid any tax planning strategy that appears “too good to be true.” Review every line of your tax return before filing it, and speak up immediately if you suspect any problems.
Understanding these distinctions and potential penalties is crucial if you are facing tax evasion charges or are concerned about a high-risk audit in Oakland.
Whether you have failed to file your tax returns where required or have provided false or incomplete information concerning any material item on your previously filed tax returns and are losing sleep at night because of the genuine fear of prosecution, contact the Tax Law Office of David W. Klasing immediately for a reduced rate consultation to speak to our dual-licensed Tax evasion or Tax fraud Attorneys & CPAs. Call our Oakland tax office at (510) 764-1020 for a reduced-rate initial consultation, or contact us online here.
Can the IRS Detect Cryptocurrency Tax Evasion in Oakland?
As of 2023, the Internal Revenue Service (IRS) has significantly intensified its efforts to ensure compliance in cryptocurrency reporting, especially on large amounts of unreported income. This enhanced focus can be attributed to the increasing mainstream acceptance and usage of digital assets, necessitating more robust regulatory oversight to ensure tax compliance.
Our Oakland Bitcoin and Virtual Currency Tax Evasion Attorneys & CPAs have extensive experience in all facets of cryptocurrency, from understanding the nuances of airdrops to addressing challenges faced by individuals whose crypto was held with a brokerage that has since folded. The exposure is even more significant for those who’ve ventured offshore with cryptocurrency. We help taxpayers who’ve intentionally committed tax evasion self-report through voluntary disclosure, potentially avoiding criminal tax prosecution and benefiting from reduced civil tax penalties.
As long as a taxpayer in Oakland who has willfully committed tax avoidance (potentially including non-filed foreign information returns coupled with affirmative evasion of U.S. income tax on offshore income) self-reports the federal tax noncompliance through a domestic or offshore voluntary disclosure with the help of our Oakland Tax Evasion Attorney before the IRS has started an audit or criminal tax investigation/prosecution, the taxpayer can ordinarily be successfully brought back into tax compliance and receive a nearly guaranteed pass on criminal tax prosecution and simultaneously often receive a break on the civil penalties that would otherwise apply.
Why Choose the Tax Law Offices of David W. Klasing for All Criminal Tax Evasion Matters in Oakland?
When dealing with an IRS criminal tax investigation, eggshell, or reverse eggshell audit, specific actions must be taken to build a robust defense and minimize potentially severe consequences. Seeking the expertise of an experienced Oakland tax evasion attorney is a wise step. Such legal professionals can guide you through the intricacies of your case, help you navigate the legal landscape, and work diligently to protect your rights and interests.
Facing criminal tax charges would surely be a horrific nightmare for anyone so unfortunate to be accused. Just the mere allegation and subsequent investigation can result in sleepless nights and can have a very damaging emotional, financial, and reputational effect even where the wrongly accused is later found innocent.
When facing high-risk tax audits from agencies like the IRS, CDTFA, EDD, or FTB, certain red flags, such as destroyed records, underreported income, badges of fraud, or unfiled returns, can intensify the examination and may lead to high-risk eggshell and reverse eggshell tax audits (see below). As such, residents and businesses must be aware of potential criminal tax violations and the signs indicating that they might be under a more rigorous investigation by the IRS’s Criminal Investigation Division (CID). This is especially so when the taxpayer has a history of blatantly cheating on their federal tax returns and is now under audit and thus fears criminal tax prosecution. Even international tax evasion schemes that utilize remote tax havens are easily detected by the IRS, which works with tax and law enforcement agencies around the globe and throughout the United States.
If you or your small business has been selected for a tax audit in Oakland and you are concerned about a criminal tax investigation resulting from or occurring alongside the audit, engaging our Oakland Criminal Tax Evasion Attorneys + CPAs services at the onset of a high-risk audit / criminal tax investigation will maximize the possibility of a favorable outcome without escalating to criminal tax charges. We have never had a federal or California audit client criminally prosecuted for tax crimes.
Our Oakland, CA Tax Evasion Lawyers and CPAs Can Help
Though perhaps easier said than done, it is critical to remain calm and avoid acting out of panic if you are being investigated by the IRS’ Criminal Investigation Division (IRS-CI) or other law enforcement agencies. Be aware of IRS investigation tactics, and remember that knee-jerk reactions or offhand statements could come back to haunt you as evidence in court. Respectfully but firmly insist on your right to be represented by an attorney, and to avoid making statements without your attorney present. Do NOT attempt to talk you way out of it as lying to a federal agent is a felony all by itself. Additionally the IRS will use any lie it can prove you told to establish willfulness if your case goes to trial.
Taxpayers who face alleged charges of tax fraud, tax evasion, or other tax controversy, whether they know it or not, urgently need a highly trained and experienced criminal tax defense attorney. Our experience dictates that garnering a head start on the Internal Revenue Service (IRS) or other taxing authority when faced with criminal tax charges is imperative to securing any possible advantage. Having sufficient time to conduct an independent investigation into the positions taken on the returns in question, time to research legal and defense options specific to the client’s fact pattern, time to interview potential witnesses, time to review the affected accounting and financial records for badges of fraud, all help minimize the client’s exposure to being convicted of a tax crime. A sufficient head start can distinguish between facing misdemeanor rather than felony charges or, better yet, facing no charges.
For a reduced-rate initial consultation, call our Oakland tax office at (510) 764-1020 or contact the Tax Law Office of David W. Klasing online here. Please note that our Oakland office is by appointment only.
Our Oakland office is conveniently located at:
505 14th St,
Oakland, CA 94612
(510) 764-1020
